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Tail risk transmission from commodity prices to sovereign risk of emerging economies

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  • Zhang, Zhengyong
  • Shahzad, Syed Jawad Hussain
  • Bouri, Elie

Abstract

The aim of this paper is to examine the impact of large fluctuations in global commodity prices on the dynamics of sovereign risk for 18 emerging economies using a conditional quantile dependence approach and weekly data covering the period March 27, 2009–April 25, 2022. The results show the following: commodity prices and sovereign risk move in opposite directions. The impact of global commodity prices on sovereign risk differ across countries. Commodity price fluctuations have asymmetric effects on sovereign risk; for some emerging countries, large upward commodity price fluctuations reduce sovereign risk, whereas large downward commodity price movements have a limited impact. These results have potential implications for investors and policy makers regarding sovereign risk management decisions and the cost of funding of investment projects.

Suggested Citation

  • Zhang, Zhengyong & Shahzad, Syed Jawad Hussain & Bouri, Elie, 2022. "Tail risk transmission from commodity prices to sovereign risk of emerging economies," Resources Policy, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:jrpoli:v:78:y:2022:i:c:s0301420722003154
    DOI: 10.1016/j.resourpol.2022.102869
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    6. Cui, Tianxiang & Ding, Shusheng & Jin, Huan & Zhang, Yongmin, 2023. "Portfolio constructions in cryptocurrency market: A CVaR-based deep reinforcement learning approach," Economic Modelling, Elsevier, vol. 119(C).

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    More about this item

    Keywords

    Commodity prices; Sovereign risk; Credit default swap (CDS); Emerging markets; Copulas; Quantile dependence;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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